Saturday, July 14, 2012

"Orphan Ideas

Luigi Zingales is the Robert C. McCormack Professor of Entrepreneurship
and Finance at the University of Chicago’s Booth School of Business...MORE

From Project Syndicate:

Since the United States Supreme Court’s “Citizens United” decision,
which prohibited the government from restricting independent political
expenditures by corporations and unions, concern about business
interests’ influence over US elections has been growing. But political
contributions are only one reason why business interests have so much
power. When it comes to lobbying, money is not everything: ideas play a
big role, too. Unfortunately, rather than leveling the playing field,
the battle of ideas may skew US politics even further in favor of big
business.

The importance of ideas can
be seen from the simplest things. Congressional bills aimed at
benefiting powerful constituencies are generally given appealing (and
misleading) names. For example, a tax holiday to repatriate foreign
earnings was called the “American Job Creation Act.” It is easier to
sell a bill that (allegedly) benefits everyone in society, not just a
small group of its most privileged members.

CommentsMore
importantly, the lobbying of the quasi-governmental mortgage lenders
Fannie Mae and Freddie Mac would not have been so successful without the
idea of the “ownership society.” How could anyone oppose turning every
American into an owner? It is precisely the appeal of such ideas that
can make them so dangerous politically.

CommentsIf
ideas are like weapons in lobbying, it is important to appreciate the
possible distortions in the market for their creation and diffusion. New
ideas are like new drugs. While some pharmacologists dedicate their
lives to searching for the cure for cancer, regardless of any monetary
incentives, many are driven by the hope of securing a lucrative patent.

Even if researchers
themselves are motivated by only the noblest of goals, their need for
funding forces them to take into account profitability. That is why we
have so-called “orphan drugs,” from which not enough money can be made
because they cure rare diseases or diseases (like malaria) that affect
people who cannot afford to pay for them.

CommentsThe
process of creating new economic ideas (or new evidence about old
ideas) is not that different. Researchers do not get patents, but they
get citations, recognition, and promotions. While some researchers
dedicate their lives to the search for truth, regardless of any personal
gain, many are driven by the hope of academic stardom and the money
that comes with it....MORE